The United States Supreme Court
recently decided an appeal of an Eighth Circuit case involving the Equal Credit
Opportunity Act (“ECOA”),
Hawkins v.
Community Bank of Raymore,
577 U.S. __ (2016). In Hawkins, Valerie Hawkins and Janice Patterson alleged they were
required to execute guaranties to the bank solely because they were married to
their spouses; they claimed this was discrimination in violation of the ECOA. Under
a technical reading of the ECOA, the Eighth Circuit Court found Hawkins and
Patterson were not “applicants” within the meaning of the statute and, since
only applicants had standing to bring a cause of action under the ECOA, they
lacked standing and could not complain of ECOA violations.
Hawkins v. Community Bank of Raymore, 761 F.3d 937 (8th
Cir. 2014).

Contrary to the Eighth Circuit decision,
the court in
RL BB Acquisition, LLC. v.
Bridgemill Commons Dev. Grp.,
754 F.3d 380 (6th Cir. 2014) found
that requiring Starr Stone Dixon to sign a guaranty for her husband’s loan gave
her grounds to allege an ECOA violation. Reviewing the same issue of whether
Starr was an “applicant,” the Sixth Circuit found ambiguity in the statute,
opening up a cause of action for this guarantor.

In light of Justice Scalia’s
recent passing, the Supreme Court decision in
Hawkins was a 4-4 tie. This means that the decision has no
precedential effect, and that the Eighth Circuit’s decision will continue to
stand. As you can see above, the
Hawkins decision
is directly contrary to that found in the
RL
BB Acquisition
case decided by theSixth
Circuit, which means there continues to be an unresolved conflict amongst the
circuits.

Bottom Line for Lenders

The law is clearly divided and
requiring spouses to sign guaranties for their wives or husbands is a risky
practice, regardless of the circuit in which the borrower resides. While it is
acceptable for a lender to ask for a guaranty, a lender must be careful not to
insist that the guarantor be the spouse of the borrower.